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Monday, May 29, 2023

How new PLI scheme will impact Bharat’s pharmaceutical industry

Bharat’s pharmaceutical industry is 3rd largest in World by volume and is USD 40 Bn in terms of value. The country contributes 3.5% of total drugs and medicines exported globally.

Bharat exports pharmaceuticals to more than 200 countries and territories including highly regulated markets such as the USA, The UK, European Union, Canada etc.

Bharat has desired ecosystem for development and manufacturing of pharmaceuticals with companies having state of the art facilities, highly skilled/technical manpower. The country also has a number of renowned pharmaceutical educational and research institutes and a robust ecosystem of allied industries.

At present, a major component of Bharat’s exports are low value generic drugs while a large proportion of the demand for patented drugs is met through imports. In order to incentivize the global and domestic players to enhance investment and production in these product categories, a well-designed and suitably targeted intervention is required.

Source: wikipedia

About the scheme

On 24 February 2021, the cabinet approved a new PLI scheme for pharma which is expected offer a total of INR 15,000 Cr in incentives over 9 years period till March, 2029 for identified pharma products for an equivalent quantum of investments. The scheme is expected to benefit domestic manufacturers, help create employment and is expected to contribute to the availability of a wider range of affordable medicines for consumers

The objective of the scheme is to enhance Bharat’s manufacturing capabilities by increasing investment and production in the sector and contributing to product diversification to high value goods in the pharmaceutical sector. The total incremental sales of INR 2,94,000 Cr and total incremental exports of INR 1,96,000 Cr are estimated as per press release by Cabinet during 6 years from FY 2022-23 to FY 2027-28.


Target Groups 

The manufacturers of pharmaceutical goods registered in Bharat will be grouped based on their “Global Manufacturing Revenue of pharmaceutical goods in Financial Year (‘FY’) 2019-20” (GMR) to ensure wider applicability of the scheme across the pharmaceutical industry and at the same time meet the objectives of the scheme.

Group Criteria Incentives (INR)
A Applicants having GMR >= INR 5,000 Cr. 11,000 Cr
B Applicants having GMR >= INR 500 Cr but < INR 5,000 Cr. 2,250 Cr
C Applicants having GMR < INR 500 Cr. (Note) 1,750 Cr
Total incentive (inclusive of administrative expenditure) 15,000 Cr

Note: Within Group C, a sub-group for MSMEs will be made given their specific challenges and circumstances.

Target Segments & rate of incentive on their incremental sales (over base year i.e. FY 2019-20) 

Category Target Segments Rate of incentive
FYs 2022-23 to 2025-26 FY 2026-27 FY 2027-28
1 ·    Biopharmaceuticals

·    Complex generic drugs

·    Patented drugs or drugs nearing patent expiry

·    Cell based or gene therapy drugs

·    Orphan drugs

·    Special empty capsules like HPMC, Pullulan, enteric etc.

·    Complex excipients

·    Phyto-pharmaceuticals

·    Other drugs as approved

10% 8% 6%
2 ·    Active Pharmaceutical Ingredients (APIs)

·    Key Starting materials (KSMs)

·    Drug Intermediates (DIs)

10% 8% 6%


(Drugs not covered under Categories 1 & 2)

·    Repurposed drugs

·    Autoimmune drugs, anti-cancer drugs, anti-diabetic drugs, anti-infective drugs, cardiovascular drugs, psychotropic drugs and anti-retroviral drugs

·    In-vitro diagnostic devices

·    Other drugs as approved

·    Other drugs not manufactured in India

5% 4% 3%

The applicants will be selected based on pre-defined objective criteria to assess their experience, capacity to grow in scale and innovate (to be elaborated in guidelines which are expected to be issued soon).

Way forward

Centre is expected to soon announce guidelines for INR 15,000 Cr incentive scheme for the pharma sector in coming days.

While it is expected that the Centre Govt would provide 2 to 3 months to those willing to apply for the scheme, one would need to keep a close eye on the final deadline to be announced by the Govt. Also, a period 2 to 3 months could be too short to make a decision on strategic aspects like enhancing the production capacities or entering into a new line of product segment as the same would involve planning of lot of factors such as:

  1. Location and Environmental issues
  2. Financials aspects relating to investments
  3. Manpower and Human Resources availability
  4. Commercial feasibility of the project, etc.


It would be advisable to utilise the time (till the guidelines are announced and the clock starts ticking!) in the planning and feasibility study of the project plans and to evaluate whether the such expansion/ entry into new product segments could stand the test of business feasibility.

Further, the companies could also explore the benefits by way of incentives announced by Central and State Govts under various schemes which could be availed along with PLI:

  • Manufacturing in Bond (under Customs)
  • State Incentives (by various State Govts), etc.

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Neeraj Bang
Neeraj Bang
CA from Mumbai working with one of the most renowned consulting firms for 8.5+ years (since 2012) and currently serving as a manager. Having had the opportunity to work with most of the largest MNC and industry leaders across the globe on a variety of projects over the years, I am also active on various professional forums intended to benefit the fraternity, fellow professionals and colleagues. Focusing on aspects like structuring, automation, process reviews, advisory, compliances, risk-benefit analysis under indirect tax domain and hard core litigation at all levels right upto Supreme Court in direct taxes, I aspire to make a meaningful contribution to the evolving future of the profession in industry, consulting and traditional practice firms.


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